Electromed, Inc. Reports Higher Second Quarter Revenues and Profits

February 10, 2015 04:36 PM Eastern Daylight Time

NEW PRAGUE, Minn.--(EON: Enhanced Online News)--Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for
the three-and six-month periods ended December 31, 2014. Net revenues
for the second quarter of fiscal 2015 rose approximately 40% to $4.9
million, compared to $3.5 million in the same quarter of fiscal 2014.
The Company reported net income of $423,000, or $0.05 cents per basic
and diluted share, for the second quarter of fiscal 2015, compared to a
net loss of $239,000, or ($0.03) per basic and diluted share, for the
same period of fiscal 2014.

Growth in total net revenues was attributable to strong results in the
home care market where revenue increased by approximately 53%, or $1.5
million, compared to the same period of fiscal 2014. Home care sales
increased due to a greater number of approvals from third party payers,
such as insurance companies, Medicare and Medicaid, for the Company’s
SmartVest™ products. International sales decreased by 73%, or $107,000,
due primarily to the timing of orders placed by international
distributors in the first quarter of fiscal 2015 rather than the second
quarter of fiscal 2015. Institutional and government sales decreased
12%, or $54,000, compared to the second quarter of fiscal 2014.

Gross margins in the second quarter of fiscal 2015 were 69.7%, down from
72.1% in the second quarter of fiscal 2014. The decline was primarily
due to an impairment charge of $107,000, taken on tools that became
obsolete during the second quarter of fiscal 2015 as we implemented
certain lower cost manufacturing processes that reduce the cost of
producing the SmartVest SQL™. Over time, the Company expects to bring
manufacturing costs for the SQL product roughly in line with previous
products. Operating expenses, which include selling, general and
administrative (SG&A) and research and development (R&D), declined to
61% of revenue compared with 81% of revenue in the second quarter of
fiscal 2014. The decline resulted from the higher level of net revenues
in the second quarter of fiscal 2015. Operating expenses rose slightly
as a result of higher sales commission and bonus expenses due to higher
revenue and profitability.

The Company generated $328,000 of cash flow from operations in the
second quarter and finished the quarter with over $2.4 million of cash
on hand.

For the first six months ended December 31, 2014, revenue increased 40%,
to $9.7 million, compared to the same period of fiscal 2014. Gross
margins were 69.4%, down from 70.5% in the second quarter of fiscal
2014, while net income increased to $800,000 or $0.10 per basic and
diluted share compared to a net loss of $575,000 in the same period of
the prior year.

Kathleen Skarvan, Electromed’s chief executive officer, commented, “I am
pleased with the progress the Company continues to make as we reported
our third consecutive profitable quarter. Revenue growth, gross margin
and expense management were all solid in the second quarter. The
market’s acceptance of the SmartVest SQL, which we introduced in early
calendar 2014, continues to be good. We have made notable progress on
bringing manufacturing costs down for SQL and there is additional
progress we believe we can make as fiscal 2015 continues.

“Our reimbursement team deserves a good deal of credit as they have
focused on obtaining reimbursement from insurers for referrals we
received in past quarters. This has been an important source of revenue
for the Company in the last several quarters and we have cleared a
significant number of referrals that were awaiting approval for
reimbursement. In order to maintain our revenue momentum, we will need
to generate higher sustained levels of new referrals in coming quarters.
To that end, our sales team and its leadership have been focused on both
improving penetration at existing accounts as well as adding new
accounts.”

About Electromed, Inc.Electromed, Inc. manufactures,
markets, and sells products that provide airway clearance therapy,
including the SmartVest® Airway Clearance System and related
products, to patients with compromised pulmonary function. Further
information about the Company can be found at www.electromed.com.

Cautionary StatementsCertain statements found in
this release may constitute forward-looking statements as defined in the
U.S. Private Securities Litigation Reform Act of 1995. Forward-looking
statements reflect the speaker’s current views with respect to future
events and financial performance and include any statement that does not
directly relate to a current or historical fact. Forward-looking
statements can generally be identified by the words “believe,” “expect,”
“anticipate” or “intend” or similar words. Forward-looking statements
made in this release include the Company’s beliefs regarding continued
progress in its reimbursement,revenue growth and cost control
strategies. Forward-looking statements cannot be guaranteed and actual
results may vary materially due to the uncertainties and risks, known
and unknown, associated with such statements. Examples of risks and
uncertainties for Electromed include, but are not limited to, the impact
of emerging and existing competitors, the effect of new legislation on
our industry and business, the effectiveness of our sales and marketing
and cost control initiatives, changes to reimbursement programs, as well
as other factors described from time to time in our reports to the
Securities and Exchange Commission (including our Annual Report on Form
10-K). Investors should not consider any list of such factors to be an
exhaustive statement of all of the risks, uncertainties or potentially
inaccurate assumptions investors should take into account when making
investment decisions. Shareholders and other readers should not place
undue reliance on “forward-looking statements,” as such statements speak
only as of the date of this release.

Electromed, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

December 31,

June 30,

2014

2014

Assets

(Unaudited)

Current Assets

Cash

$

2,452,361

$

1,502,702

Accounts receivable (net of allowances for doubtful accounts of
$45,000)

6,628,860

6,487,267

Inventories

2,234,492

2,235,496

Prepaid expenses and other current assets

372,177

397,853

Total current assets

11,687,890

10,623,318

Property and equipment, net

3,772,457

3,935,802

Finite-life intangible assets, net

868,797

930,451

Other assets

352,097

302,595

Total assets

$

16,681,241

$

15,792,166

Liabilities and Equity

Current Liabilities

Current maturities of long-term debt

$

47,125

$

46,375

Accounts payable

480,989

380,582

Accrued compensation

515,039

391,040

Warranty reserve

700,000

700,000

Other accrued liabilities

151,189

302,482

Total current liabilities

1,894,342

1,820,479

Long-term debt, less current maturities

1,227,653

1,251,192

Total liabilities

3,121,995

3,071,671

Commitments and Contingencies

Equity

Common stock, $0.01 par value; authorized: 13,000,000;
shares issued and outstanding: 8,133,857 and 8,114,252 at December
31, and June 30, 2014, respectively

81,339

81,143

Additional paid-in capital

13,255,481

13,217,166

Retained earnings (accumulated deficit)

222,426

(577,814

)

Total equity

13,559,246

12,720,495

Total liabilities and equity

$

16,681,241

$

15,792,166

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

For the Three Months Ended

For the Six Months Ended

December 31,

December 31,

2014

2013

2014

2013

Net revenues

$

4,881,723

$

3,501,075

$

9,652,262

$

6,919,253

Cost of revenues

1,478,290

978,029

2,954,087

2,040,375

Gross profit

3,403,433

2,523,046

6,698,175

4,878,878

Operating expenses

Selling, general and administrative

2,872,402

2,739,104

5,693,897

5,463,032

Research and development

83,643

92,735

158,909

301,843

Total operating expenses

2,956,045

2,831,839

5,852,806

5,764,875

Operating income (loss)

447,388

(308,793

)

845,369

(885,997

)

Interest expense, net of interest income of $461, $3,940 $1,673 and
$11,338 respectively

24,677

19,469

45,129

34,670

Net income (loss) before income taxes

422,711

(328,262

)

800,240

(920,667

)

Income tax benefit

-

89,000

-

346,000

Net Income (loss)

$

422,711

$

(239,262

)

$

800,240

$

(574,667

)

Income (loss) per share:

Basic

$

.05

$

(0.03

)

$

.10

$

(0.07

)

Diluted

$

.05

$

(0.03

)

$

.10

$

(0.07

)

Weighted-average common shares outstanding:

Basic

8,114,252

8,114,252

8,114,252

8,114,252

Diluted

8,130,245

8,114,252

8,119,575

8,114,252

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Six Months Ended

December 31,

2014

2013

Cash Flows From Operating Activities

Net income (loss)

$

800,240

$

(574,667

)

Adjustments to reconcile net income (loss) to net cash provided by
operating activities: